Friday, June 25, 2010

Outsourcing simply means contracting out work, either essential or non-essential, to a third party who is specialized in that particular task, located either in the same country or overseas. When the service provider is located in a different country the outsourcing process is more specifically termed Off sourcing. Outsourcing or off sourcing is a constantly growing industry estimated at $20 billion currently, and the biggest chunk of this outsourcing pie is received by emerging economies like India, China, Brazil, Philippines and Mexico. So what are the various types of outsourcing processes and how can an enterprise benefit from them?

Outsourcing is of multiple types, like Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO), Medical Outsourcing, Accounts Process Outsourcing, Legal Process Outsourcing (LPO) etc. In BPO, which is the most common form of outsourcing or offsourcing, the non-core tasks like payroll maintenance, house keeping, and customer support are handed over to companies with proven expertise in the field. Similarly, a company would want to outsource it's accounting processes to a service provider in India or other country. With more than 1.8 million patents being filed annually, Legal Process Outsourcing or LPO has also emerged as a booming industry. Legal services can be obtained for far lower rates in India than in the US and are of the same high standards. Not just patents, even routine legal services like filing affidavits, are being outsourced to third parties as part of LPO.

Some companies specialize in providing knowledge oriented services relating to research and e-education, making up the blossoming knowledge Process Outsourcing (KPO) sector. Even hospitals haven't lagged behind other sectors and are actively outsourcing medical transcription and billing processes to cheaper destinations like India. In fact, medical transcription is offering a new window of opportunity to many young persons in the developing world, especially females, to earn a steady income from a moderately skilled job.

So what are the Benefits of Outsourcing?

Outsourcing has many obvious benefits like reduction in overall operating costs of an enterprise. By outsourcing the non-core tasks like housekeeping to a third party, the company can concentrate on its core areas, say, software development. Also fixed costs like employee salaries and benefits can be turned into variable ones as the company no longer needs to provide salaries, maternity leave, travel and dearness allowance to employees who are on the payroll of the overseas service partner, all such essentials are the concerns of the latter. This represents tremendous savings in cost, which is especially useful during financial downturns.

Another benefit of outsourcing is that the same high quality service is provided by the overseas service providers, so there is no question of low quality work for low rates, as assumed by many. Moreover the members of the project team very quickly imbibe the work culture of the US or UK based client company and also possess excellent communication skills to complete the task in the shortest time possible. Outsourcing has also rendered continuous development possible, which means working in a constant cycle without interruption, cutting down on the development time drastically. While the UK based team works during the daytime and sleeps in the night, the India based team, which enjoys day, picks up on the task, thus rendering continuous development possible.

Outsourcing also has certain invisible benefits like obtaining a foot hold in new markets, understanding the psyche of the people before introducing a new product or service in foreign land and also certain obvious financial gains in the form of tax benefits, concessional land and so on. No wonder, outsourcing is here, not just to stay, but grow by leaps and bounds in the foreseeable future.